China Pharmaceuticals (CRRWF) 10-Q 2008 Q4 Quarterly report

________________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to 

Commission file number: 000-52763

ALLSTAR  RESTAURANTS

(Exact name of Small Business Issuer as Specified in its Charter)

Nevada	20-2638087
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or	Identification
Organization)	Number)

1458 Broad Street, Regina, Sask. S4R 1Y9, Canada

(Address of registrant's principal executive offices)

306-529-2652

(Issuer’s Telephone Number, Including Area Code)

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x       No  o

Indicate by check mark whether the Issuer is a shell company (as defined by Rule 12b-2 of the Exchange Act).

Yes  o      No  x

State the number of shares outstanding of each of the Issuers classes of common equity, as of the latest practicable date:

Common, $.001 par value per share: 9,950,000 outstanding as of January 29th, 2009.

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TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS	3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	10
ITEM 3. CONTROLS AND PROCEDURES	13
PART II - OTHER INFORMATION	13
ITEM 1. LEGAL PROCEEDINGS	13
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	14
ITEM 5. OTHER INFORMATION	14
ITEM 6. EXHIBITS	14
SIGNATURES	14
EXHIBIT 31.1	15
EXHIBIT 32.1	15

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PART I - FINANCIAL INFORMATION

Item 1.       Financial Statements.

ALLSTAR  RESTAURANTS

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2008

(Unaudited)

INDEX	Page
Consolidated Balance Sheets	F-1
Unaudited Consolidated Statements of Operations	F-2
Unaudited Consolidated Statement of Stockholders’ Equity(Deficit)	F-3
Unaudited Consolidated Statements of Cash Flows	F-4
Notes to the Unaudited Consolidated Financial Statements	F-5 to F-6

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ALLSTAR RESTAURANTS
CONSOLIDATED BALANCE SHEETS
	December 31,			March 31,
	2008			2008
	(Unaudited)			(Audited)
CURRENT ASSETS
Cash	$	35,283		$	49,722
Accounts receivable - other		-			621
Inventory - total		14,485			17,257
Prepaids		9,072			11,846
TOTAL CURRENT ASSETS		58,840			79,446
NET FIXED ASSETS		165,936			254,103
OTHER ASSETS
Deposits		5,573			6,640
Debt Offering Costs		1,633			2,224
TOTAL OTHER ASSETS		7,206			8,864
TOTAL ASSETS	$	231,982		$	342,413
CURRENT LIABILITIES
Accounts payable and accrued liabilities		35,340			39,462
SBL loan - current portion		23,743			26,070
Shareholder's loan		120,680			212,282
TOTAL CURRENT LIABILITIES		179,763			277,814
LONG TERM LIABILITIES
Long term debt - SBL loan		72,490			108,387
TOTAL LIABILITIES		252,253			386,201
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock; 75,000,000 shares authorized at $0.001 par value, 9,950,000 and 9,950,000 shares issued and outstanding, respectively (Note 3)		9,950			9,950
Additional paid-in capital		119,160			63,740
Currency Translation		(300	)		486
Retained Earnings (Deficit)		(149,081	)		(117,964	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		(20,271	)		(43,788	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	231,982		$	342,413

The accompanying notes are an integral part of these consolidated financial statements. 

F-1

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ALLSTAR RESTAURANTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	For the Three Months Ended				For the Nine Months Ended
	December 31,				December 31,
	2008		2007		2008			2007
SALES	$	320,286	$	344,330	$	992,968		$	919,574
COST OF SALES		95,800		108,535		304,465			296,434
GROSS PROFIT		224,486		235,795		688,503			623,140
OPERATING EXPENSES
Payroll expenses & benefits		127,715		128,820		405,183			359,802
Professional fees		8,824		7,959		37,621			36,711
General administrative expenses		14,003		13,051		60,601			41,506
Marketing & advertising		14,165		14,873		38,954			27,238
Depreciation & amortization		20,621		22,085		67,624			66,254
Rent & utilities		24,958		28,328		79,965			86,737
TOTAL OPERATING EXPENSES		210,286		215,116		689,948			618,248
INCOME FROM OPERATIONS		14,200		20,679		(1,445	)		4,892
OTHER EXPENSES
Interest expense		7,651		12,675		29,672			36,195
TOTAL OTHER EXPENSES		7,651		12,675		29,672			36,195
INCOME(LOSS)BEFORE INCOME TAXES		6,549		8,004		(31,117	)		(31,303	)
PROVISION FOR INCOME TAXES		-		-		-			-
NET INCOME (LOSS)	$	6,549	$	8,004	$	(31,117	)	$	(31,303	)
Basic and fully diluted income (loss) per share of common stock	$	-	$	-	$	-		$	-
Weighted average number of common shares outstanding, basic and fully diluted		9,950,000		9,950,000		9,950,000			9,950,000

The accompanying notes are an integral part of these consolidated financial statements.

F-2

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ALLSTAR RESTAURANTS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
					Additional		Comprehensive
	Common Stock				Paid In		Income			Accumulated
	Shares		Amount		Capital		(Loss)			Deficit
BALANCE, MARCH 31, 2008		9,950,000	$	9,950		63,740		486			(117,964	)
Imputed interest on shareholder loan credited to contributed capital (unaudited)		-		-		10,460		-			-
Conversion of shareholder loan to contributed capital (unaudited)		-		-		44,960		-			-
Loss on currency translation (unaudited)		-		-		-		(786	)		-
Net Loss for the nine months ended December 31, 2008 (unaudited)		-		-		-		-			(31,117	)
BALANCE, DECEMBER 31, 2008 (unaudited)		9,950,000	$	9,950	$	119,160	$	(300	)	$	(149,081	)

The accompanying notes are an integral part of these consolidated financial statements.

F-3

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ALLSTAR RESTAURANTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the Nine Months Ended
	December 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(31,117	)	$	(31,303	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation & Amortization		67,624			66,254
Contribution of Interest		10,460			15,532
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable - other		621			(8,591	)
Increase in Inventory		-			-
Decrease (increase) in prepaids		-			(877	)
(Increase) decrease in deposits		-			-
Decrease in debt offering costs		-			434
Increase (decrease) in accounts payable		(11,384	)		(5,198	)
Net Cash Provided (Used) by Operating Activities		36,204			36,251
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(14,258	)		(18,555	)
Net Cash Provided (Used) by Investing Activities		(14,258	)		(18,555	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on SBL loan		(16,623	)		(17,515	)
Payments on Shareholder loan		(19,762	)		(47,531	)
Proceeds from Shareholder loan		-			44,960
Net Cash Provided by Financing Activities		(36,385	)		(20,086	)
NET INCREASE (DECREASE) IN CASH	$	(14,439	)	$	(2,390	)
CASH POSITION, BEGINNING OF PERIOD		49,722			60,701
CASH POSITION, END OF PERIOD		35,283			58,311
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID FOR DURING THE PERIOD:
Interest	$	19,212		$	20,663
Income Taxes	$	-		$	-
NON CASH FINANCING ACTIVITIES
Interest contributed by stockholder	$	10,460		$	15,532

The accompanying notes are an integral part of these consolidated financial statements.

F-4

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ALLSTAR RESTAURANTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

1. BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations.  The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements.  Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company’s most recent audited consolidated financial statements and notes thereto as of March 31, 2008. Operating results for the six months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending March 31, 2009.

2. DESCRIPTION OF THE BUSINESS

The company was incorporated December 22, 2004 under the laws of the state of Nevada as Nexstar Properties Inc.  The company name was changed to Allstar Restaurants on March 30, 2005.  Allstar Restaurants was established to pursue opportunities in the full-service segment of the restaurant and food services industry with the objective of developing into a multi-unit restaurant and food services operation.

The company commenced operations with its first restaurant acquisition as of July 1, 2005. On July 1, 2005, a wholly owned subsidiary, Fastserve Foods Inc., incorporated under the laws of the province of Saskatchewan, Canada, in the City of Regina, was acquired. Fastserve Foods Inc., which changed its name to China Doll Foods Ltd., operates an established restaurant and sports lounge called China Doll Restaurant and Lounge, located in the City of Regina, in the province of Saskatchewan, Canada. This subsidiary acts as an operating company for all business activities relating to the company’s restaurant businesses in Canada.

3. CAPITAL STOCK

As of September 30, 2008, the company has authorized 75,000,000 common voting shares each with a par value of $0.001. As of the period ended September 30, 2008, the company had 9,950,000 common shares outstanding.

4. RELATED PARTY TRANSACTIONS

The total outstanding balance of the shareholder loan as at December 31, 2008 is $120,680 and the full amount is shown as a current liability on the balance sheet. This shareholder loan carries no set terms of principal repayment. The shareholder does not expect to make a specific claim on the interest for this loan during the current year or foreseeable future. Imputed Interest for the six months period ended has been recorded on the balance sheet at the rate of 9.00 % on the outstanding loan balance for the nine months ended December 31, 2008. Additional Paid-In Capital in the form of imputed interest on the shareholder loan was recorded. The total of this cost is shown on the balance sheet as Additional Paid-In Capital of $10,460 and in the income statement as interest expense for the same amount. During the period, in a non-cash related-party transaction, shareholder loans in the amount of $44,960 were forgiven and credited to Contributed Capital.

On July 1, 2005, a wholly owned subsidiary, Fastserve Foods Inc., incorporated under the laws of the province of Saskatchewan, Canada, in the City of Regina, was acquired.  Fastserve Foods Inc. operates an established restaurant and sports lounge called China Doll Restaurant and Lounge, located in the City of Regina, in the province of Saskatchewan, Canada. This subsidiary, now known as China Doll Foods Ltd., currently acts as the operating entity for all business activities relating to the company’s restaurant businesses in Canada.

F-5

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ALLSTAR RESTAURANTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

4. RELATED PARTY TRANSACTIONS (continued)

The acquisition was executed by exchanging all (100%) of the issued and outstanding common shares (100) of Fastserve Foods Inc., for 5,000,000 common shares issued by Allstar Restaurants.  As stated, the majority shareholder is currently the Chairman of the Board and Chief Executive Officer of Allstar Restaurants. As of the date of this filing, the shareholder holds a total of 5,100,000 common shares of Allstar Restaurants.

5. FOREIGN CURRENCY TRANSLATIONS

The Company’s functional currency is the Canadian dollar. The Company’s reporting currency is the U.S. dollar.  All transactions initiated in other currencies are re-measured into the functional currency as follows:

Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date,

ii)   Non-monetary assets and liabilities, and equity at historical rates, and

iii)   Revenue and expense items at the average rate of exchange prevailing during the period.

Gains and losses on re-measurement are included in determining net income for the period

Translation of balances from the functional currency into the reporting currency is conducted as follows:

Assets and liabilities at the rate of exchange in effect at the balance sheet date,

ii)   Equity at historical rates, and

iii)   Revenue and expense items at the average rate of exchange prevailing during the period.

Translation adjustments resulting from translation of balances from functional to reporting currency are accumulated as a separate component of shareholders’ equity as a component of comprehensive income or loss.

6. GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. For the nine months period ended December 31, 2008, the Company has incurred a net loss of $(31,117) and losses from operations in recent prior periods. The company’s current liabilities exceed its current assets by $(120,923). These factors may create uncertainty about the Company's ability to continue as a going concern. In order to continue as a going concern and achieve a profitable level of operations, the Company will require, among other things, additional capital resources. Management's plans to obtain such resources for the Company include (1) Issuing promissory notes in exchange for additional shareholder loans; (2) conversion of existing promissory notes into common stock; (3) the company will actively seek to execute additional acquisitions of established restaurant businesses that present opportunities for additional cash flow and value creation via marketing and operational enhancements. However, it is anticipated that any future acquisition(s) will not be executed prior to the end of the fiscal year ended 2009; (4) The Company has filed a Form SB-2 Registration statement to the United States Securities and Exchange Commission and is now a fully reporting and publicly-traded corporation. We had received a Notice of Effectiveness on August 13, 2007, officially making us a fully reporting Public Company. This will provide enhanced opportunities for the Company should it decide to raise capital via stock offerings in the future.

Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.

F-6

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Item 2.       Management’s Discussion and Analysis or Plan of Operation.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10-Q.

Forward-Looking Statements

This discussion contains forward-looking statements that involve risks and uncertainties. All statements regarding future events, our future financial performance and operating results, our business strategy and our financing plans are forward-looking statements. In many cases, you can identify forward-looking statements by terminology, such as “may”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology.  These statements are only predictions.  Known and unknown risks, uncertainties and other factors could cause our actual results to differ materially from those projected in any forward-looking statements.  We do not intend to update these forward-looking statements.

Overview

Allstar Restaurants, (referred to herein as the “Company”, “Allstar”, “we”, “us” and “our”) is primarily engaged in the restaurant business located in the city of Regina, in the province of Saskatchewan, Western Canada.

We were incorporated on December 22, 2004 under the laws of the State of Nevada originally under the name Nexstar Properties, Inc. By Director’s resolution, on March 30, 2005, the company’s name was changed to Allstar Restaurants. The company’s United States registered corporate agent office is located at 375 N.  Stephanie St., Suite 1411, Henderson, NV, 89014-8909. The mailing address of our registered corporate agent is PO Box 94438, Las Vegas, NV 89193-4438. Our principal executive offices are located at 1458 Broad Street, Regina, Saskatchewan, S4R 1Y9, Canada. The telephone number for our executive office is 306.529.2652. The fax number is 306.352.1597.

We are a restaurant company with the objective of developing into a multi-unit full-service restaurant and food services business. The company was established to pursue opportunities in the family style full-service casual dining segment of the restaurant industry. Allstar Restaurants, through a wholly owned subsidiary called China Doll Foods Ltd. (formerly Fastserve Foods Inc.), acquired on July 1, 2005, currently owns and operates an established restaurant and licensed lounge called China Doll Restaurant and Lounge. This restaurant is located in the city of Regina, in the province Saskatchewan, Canada. This subsidiary, China Doll Foods Ltd., currently acts as the operating company for all business activities relating to the company’s restaurant business(s) in Western Canada. The China Doll Restaurant is currently the only restaurant location operated and wholly-owned by Allstar Restaurants.

We have received a going concern opinion from our auditors which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. For the nine months period ended December 31, 2008, the Company had a net loss of $(31,117) and an accumulated retained earnings deficit as at December 31, 2008 of $(149,081). The Company intends to fund operations over the next six to twelve months through improved cash flow generated from operations as well as equity financing arrangements, both of which should be sufficient to fund its capital expenditures, working capital and other cash requirements over the next three months to the year ending March 31, 2009. Please refer to Note 6, “Going Concern”, accompanying the financial statements.

The discussion below provides an overview of our operations, discusses our results of operations, our plan of operations and our liquidity and capital resources.

Results of Operations

Overview - - Quarter ended December 31, 2008

Total salesfor the three months ended December 31, 2008 were $320,286 compared to $344,330 in sales for the three months ended December 31, 2007, representing a decrease of 6.9 % in period-over-period sales. Given that our reporting currency is the United Sates dollar while our primary operations are in Canadian Dollar currency, this decrease in sales is primarily due to the weaker Canadian dollar and the resulting movement in the currency exchange rate during the period.

- 10 - -

Gross profit, herein defined as sales less cost of sales, was $224,486 for the three months ended December 31, 2008, compared to $235,795 gross profit for the three months ended December 31, 2007.

Our operating expenses were $210,286 for the three months ended December 31, 2008 compared to operating expenses of $215,116 for the three months ended December 31, 2007. Operating expense increased primarily as a result of the weaker Canadian dollar and movement in the exchange rate during the period. There were no significant changes in payroll expenses and benefits, professional fees, or general administrative expenses for the three months ended December 31, 2008 compared to the three months ended December 31, 2007. Professional fees consist largely of accounting, auditing, and legal fees to prepare and audit the year-end financial statements and for the preparation and filing of the company’s 10K-SB and 10-Q filings. Depreciation and amortization expenses for the three months ended December 31, 2008 was $20,621 as compared to $22,085 for the three months ended December 31, 2007. We had no fixed asset additions for the period.

We realized a net gain of $6,549 for the three months ended December 31, 2008 compared to a net gain of $8,004 for the three months period ended December 31, 2007.

Overview – Nine months ended December 31, 2008

Total salesfor the nine months ended December 31, 2008 were $992,968 compared to $919,574 in sales for the nine months ended December 31, 2007, representing an 7.99 % overall increase in period-over-period sales. This increase in sales was the result of a combination of increased marketing and advertising expenditures, menu price increases during the early part of the period, and the continued strength of the Western Canadian economy. Gross profit, herein defined as sales less cost of sales, was $688,503 for the nine months ended December 31, 2008, compared to $623,140 in gross profit for the nine months ended December 31, 2007.

Our operating expenses were $689,948 for the nine months ended December 31, 2008 compared to operating expenses of $618,248 for the nine months ended December 31, 2007. Operating expenses increased primarily as a result of an increase in payroll expenses and benefits to $405,183 for the nine months period ended December 31, 2008 as compared to $359,802 for the previous nine months period ended December 31, 2007. The increase in payroll expenses for the period was the result of a general per-hour wage increase for most staff as a mandated Provincial minimum wage increase came into effect. Also, the addition of kitchen staff and front-end serving staff, as a result of the trend in increases sales realized for the period was a contributing factor. As a result of part of our strategy to drive increased sales and market share, our marketing and advertising expenditures increased to $38,954 for the period as compared to $27,238 for the same period in 2007. Our general administrative expenses increased for the nine months period ended to $60,601 as compared to $41,506 for the same period in 2007, as a result of realizing higher than average expenditures on repairs and maintenance expenses in the restaurant for the period.

We realized an overall total net loss of $(31,117) for the nine months ended December 31, 2008 compared to a net loss of $(31,303) for the nine months period ended December 31, 2007.

Operations Outlook

The Company's plan of operations and primary objective for the next three months to the fiscal period ending March 31, 2009 is to continue to strive to increase its existing restaurant location sales while controlling costs. We will also begin to analyze prospects for acquiring additional restaurant locations to either extend our existing brand concept or look to acquire other existing established restaurant operations.

For our existing restaurant operation, the company intends to reach its sales objectives as follows:

· Maintain marketing expenditures in the fourth quarter (January 2009 to March 2009) of our fiscal year. We will continue to focus our marketing efforts on continuing to position our restaurant business based on the highly differentiated quality of our core Chinese food menu items as well as our superior customer service both for the dine-in and takeout segments of our business. We will emphasize our message of “quality with great service” in our print, radio, on-line, and direct mail campaigns as we move into the end of the winter season.

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· Continue to reinvest in the existing restaurant business where necessary to improve and freshen the interior and exterior appearance,

· Continue to focus on improving overall customer satisfaction measures through enhanced management and customer service training processes,

· Bring into effect a menu price increases to maintain profit margins and to keep up with rising food costs,

· Focus on expanding our city-wide delivery and takeout service concept by improving efficiency and utilizing creative and aggressive marketing initiatives,

· Continue to streamline and standardize our cost and accounting controls systems and procedures.

Allstar Restaurants’ objective and plan for our existing restaurant operation, the China Doll Restaurant, is to continue to strive to increase restaurant sales through increased customer counts in each serving day-part (lunch, dinner and late-night, takeout), selective menu and price promotions and effective marketing of China Doll Restaurant’s competitive attributes of high quality food products, superior taste and value pricing. Over the next three to six months the number of our employees, in particular kitchen staff, may decline slightly as we move into the spring and summer seasons which will allow us to cut overhead costs as sales decline slightly as expected. Management will continue to standardize and document operations procedures with the objective of extending the China Doll Restaurant brand in the future to either additional corporate-owned locations or explore the feasibility of future franchise offerings.

Although we cannot predict with certainty what revenues we can expect during the next twelve months, we believe that we will generate enough revenue, when added to our cash on hand, to pay our operating expenses for the next twelve months. We anticipate that we may have an opportunity to raise additional capital to expand our operations through equity financings. However, we cannot guarantee that we will be able to raise that capital, in which event our expansion and operations plans may be required to be altered or even curtailed.

Liquidity and Capital Resources

Overview – Nine Months Ended December 31, 2008

For the nine months period ended December 31, 2008, net cash provided by operating activities was $36,204. Net cash provided by operating activities for the nine months period ended December 31, 2007 was $36,251.

Cash (used) by investing activities during the nine months ended December 31, 2008 was $(14,258). Net cash (used) by investing activities for the nine months ended December 31, 2007 was $(18,555).

Net cash (used) by financing activities for the nine months ended December 31, 2008 was $(36,385). Net cash (used) provided by financing activities for the nine months period ending December 31, 2007 was $(20,086). For the nine months period ended December 31, 2008 we made payments to reduce the SBL Loan as well as reducing the Shareholder Loan, while receiving no proceeds from financings, which accounted for the net cash (used) by financing activities for the nine months ended December 31, 2008.

As at December 31, 2008 we had $35,283 in cash, compared to $58,311 as at December 31, 2007. We had a negative working capital of $(120,923) as at December 31, 2008 compared to a negative working capital of $(198,368) as at December 31, 2007.

We will continue to have professional fees which include accounting, auditing, legal, and statutory filing fees, and those fees may increase because of our reporting status and the required filings for requisite quarterly and annual reports with the Securities and Exchange Commission. We expect that we will have additional filings whereby our auditors may be required to prepare further financial reports.  We are aware that audit fees have generally increased as a function of the increased reporting requirements mandated by the recently enacted Sarbanes-Oxley Act. We are optimistic that our business activities will increase, which will require auditing procedures over a greater transaction base. We expect our other administrative expenses to increase in the next quarter as our legal fees may increase as we further our strategic goals and additional advice and/or opinions may be required. 

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Due to the foregoing factors, our operating results are difficult to forecast.  You should evaluate our prospects in light of the risk, expenses and difficulties commonly encountered by comparable development-stage companies in rapidly evolving markets.  We cannot assure you that we willsuccessfully address such risks and challenges.  In addition, even though we have an operational business with revenues, we cannotassure you that our revenues willincrease or that we will continue to be profitable in the future.

Other Information - Certain Relationships and Related Transactions

We intend that any transactions between us and our officers, directors, principal stockholders, affiliates or advisors will be on terms no less favorable to us than those reasonably obtainable from third parties.  To date, the following related party transactions have taken place:

As noted in Note 4 of the Consolidated Financial Statements of December 31, 2008: During the nine months ended December 31, 2008, the principal shareholder provided no additional loans to the company. The total outstanding balance of the shareholder loans as at December 31, 2008 is $120,680 and the full amount is shown as a current liability on the balance sheet. This shareholder loan carries interest but has no set terms of principal repayment. The shareholder does not expect to make a specific claim on the interest for this loan during the current year or foreseeable future. Imputed Interest on the shareholder loan for the six months period ended has been recorded on the income statement as interest expense at the rate of 9.00 % on the outstanding loan balance for the nine months ended December 31, 2008. This imputed interest in the amount of $10,460 was recorded on the balance sheet in the form of Additional Paid-In Capital.

On October 4th, 2007, we received clearance from the NASD to have our securities trade publicly on the Over-the-Counter Bulletin Board exchange under the symbol AREN.OB. There is no assurance that a liquid trading market will develop, or, if developed, that it will be sustained. A purchaser of our shares may, therefore, find it difficult to resell our shares publicly should he or she desire to do so. Furthermore, our shares are not marginal and it is unlikely that a lending institution would accept our common stock as collateral for a loan.

Item 3.       Controls and Procedures.

Management has evaluated, with the participation of our Principal Executive Officer and Principal Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) as of the end of the period covered by this report.  Based upon this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.  There have been no significant changes in our internal controls over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.       Legal Proceedings.

There are no material pending legal proceedings to which the Company is a party or to which any of its property is subject.

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds.

None

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Item 3.       Defaults Upon Senior Securities.

None.

Item 4.       Submission of Matters to a Vote of Security-Holders.

None.

Item 5.       Other Information.

None.

Item 6.       Exhibits.

31.1	Certification of Principal Executive Officer and Principal Financial Officer  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

ALLSTAR  RESTAURANTS

(Registrant)

Dated:  January 29th, 2009                                       

By:  /s/ Terry G. Bowering

       Terry G. Bowering, Chief Executive Officer

       (Principal Executive Officer) Chief Financial Officer,

       Chief Accounting Officer (Principal Financial Officer)

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